Can I Afford to Buy a Home?

One of the most common questions we hear from potential clients is whether or not they can afford to buy a home. Many people rent homes even though they really would like to be homeowners.  One of the quickest ways to figure out if buying makes sense is to do a calculation based on the rent you are currently paying.  

Click here for a rent vs. buy calculator. In Austin, home values have appreciated an average of 5% to 10% over the past few years as shown on this chart of Austin appreciation rates.  Austin has consistently outperformed both Texas and national home appreciation rates, demonstrating the strength of home values here. 

Credit Problems?

Many people are unable to purchase a home due to credit problems.  If your credit is an issue, you should take advantage of the free credit report program. The Fair and Accurate Credit Act of 2003 made it possible for consumers to request a free credit report every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. This service, established by the federal government, was made available to Texans on June 1, 2005.

Annual access to all three credit reporting companies enables you to accurately track your financial history, spotting any errors along the way. If you do find legitimate problems in your credit file disclosure, you can work to improve your credit standing before contacting a loan officer.  To access your report, visit www.annualcreditreport.com.

How much down payment & closing costs do I need to buy a home?

Many people mistakenly believe that you must have a 20% down payment to buy a home. While down payment amounts have increased and credit requirements tightened, it is still possible to get into a home as a first-time homebuyer with a low down payment. One program that only requires a 3.5% down payment is the FHA (Federal Housing Administration) loan.  You may be a good candidate for an FHA loan if the following sounds like you:

• You're a first-time homebuyer.  
• You don't have a lot of money to put down on a house.  
• You want to keep your monthly payments as low as possible.
• You're worried about your monthly payments going up.
• You're worried about qualifying for a loan.
• You don't have perfect credit.

You can read more about FHA loans by visiting their website.  FHA is just one example of a loan program and first-time homebuyers may qualify for a variety of low down payment options.  Your lender can review all available options you may qualify for and how low they can get your down payment.  If you'd like us to get you in touch with a few honest & reputable Austin lenders, click on the "Pre Qualify Now" link on the "Buyers" menu and we can have someone follow up with you (at no obligation of course). 

On closing costs & pre-paids required when you purchase a home, a good rule of thumb is to bank on paying about 3% of the purchase price. The costs can vary slightly higher or lower and your lender can give you more specifics when they provide a GFE (Good Faith Estimate) of your closing costs. You may be able to get into a home for less out of pocket expenses than you think!

Can buying a home actually save me money?

Yes!!  Renting a home means you will never see that money again and your annual costs will continue to increase. There are a variety of ways that purchasing a home will save you money and increase your financial wealth as outlined below:

1. Appreciation of your property. A home purchased in Austin in 1997 was worth double by 2008! While there’s no guarantee of appreciation, a 2001 study by the National Association of REALTORS® found that the typical homeowner has approximately $50,000 of unrealized gain in a home.

2.  Tax savings.  According to the U.S. Tax Code, you can deduct the interest paid on the mortgage, interest & property taxes as well as some costs involved with buying the home. 

3. Equity. When you pay rent, you will never recoup that money or see it again. However mortgage payments toward your house are building equity. When you sell, you will realize a gain and increase your financial wealth.

4. Ability to save. In today's times, many people find it difficult to save and live paycheck to paycheck.  Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.

5. No more rising rent rates. Rent rates increase over time. So if you are a lifelong renter, you will continually pay a higher and higher cost for the same property.  If you purchase a home, you save money since your mortgage payments will not go up over the years keeping housing costs stable; they may actually decline as you own the home longer.

While these are not ways they save you money, many proud homeowners are especially happy to enjoy perks such as finally having the freedom to decorate & update their homes exactly as they like.  Previous apartment dwellers really appreciate having a yard and more privacy.  Plus the stability of staying in the same neighborhood has some long-term benefits: getting to know neighbors, keeping kids in the same school for education continuity, and really becoming an active member of your neighborhood. 

Keep in mind if you just have some questions about buying a home or would like to talk to a lender about how they can get you pointed in the right direction to buy, we're here to help (no obligation of course!).  And if you're ready to start touring homes, we would love to make the dream of home ownership happen for you!

Homes for Rent

Buying a home is not the right decision for everyone. There may be times in your life when it makes more sense to rent.  If you would like to find out about homes for rent in your desired area and price range, we would be happy to get you connected with one of our experienced Horizon Realty Agents who handle leasing.  Horizon Realty is a dynamic and established real estate company made up of experienced-only Agents. You'll find some of the top Agents in Austin in this large office of over 70 Agents.